Chile’s economy grew less than analysts expected in the first quarter as an investment boom in the world’s largest copper producer began to wane.
Gross domestic product rose 4.1 percent from last year and 0.5 percent from the previous three months, the central bank said in a report posted on its website today. The median estimate of 12 analysts polled by Bloomberg was for annual growth of 4.5 percent. Investment expanded 9.6 percent from last year, compared with 18.1 percent in the previous three months.
Surging investment in the mining industry had helped Chile grow 5.6 percent last year, matching Venezuela for the fastest pace in South America after Peru while defying analyst forecasts of a slowdown. While mining output accelerated in the first quarter, investment growth eased with companies such as Teck Resources Ltd. and Anglo American Plc suspending some projects because of rising costs and falling metal prices.
“It’s a deceleration, but a gentle deceleration,” said Jorge Selaive, an economist at Banco Bilbao Vizcaya Argentaria SA in Santiago. “Internal demand is slowing, but is still well above the first quarter of 2012.”
Mining rose an annual 7.8 percent in the first quarter, the central bank said today, while manufacturing contracted 0.6 percent and retail gained 6.9 percent.
The central bank kept its key interest rate unchanged at 5 percent on May 16 for a 16th consecutive month as policy makers juggle the opposing pressures of a consumer spending boom and stagnant manufacturing output.
“Consumption remains dynamic,” Selaive said. The figures “don’t just point toward a rate cut.”
Consumer spending rose 6.2 percent in the first quarter from the year earlier, pulling in imports even as domestic manufacturing weakened.
As a result, the current account deficit widened to $1.69 billion in the first three months of the year from $116 million in the year earlier period. Policy makers may step back from cutting rates to prevent a further deterioration in the current account, Selaive said.
Two-year interest rate swaps declined 4 basis points, or 0.04 percentage point, to 4.46 percent as of 9:50 a.m. in Santiago.
The slowdown comes as Chile approaches developed nation status, as measured by a GDP per capital of $22,000 on a purchasing power parity bases. According to data from the International Monetary Fund, Chile will have a GDP per capita of $19,475 this year.
Finance Minister Felipe Larrain said May 17 that he remained confident that Chile would reach developed status within the next few years if the government doesn’t cave in to mounting social pressures and raise taxes and spending. Students have led demonstrations for two years seeking free education.
“The government should act in the benefit of all Chileans, and not just those in the street protesting,” the minister said.